Group 3
Ma hui xin MA2N0245
黃琤琁
MA260207
陳怡琇
MA290206
Introduction

Not only is its budget stressed but the people
who own and operate the business are often
stressed as well.

A
business
management.

Improve their lives and to achieve financial
security.

Work hard to launch a business and invest a lot
of money
practice
prudent
financial
Cold Stone Creamery

Cold Stone Creamery was founded in 1988.

Neither hard-packed nor soft – serve, and
opened the first store in Temple, Arizona.

Name comes from the frozen granite stone
used to mix “mix-ins” like candy.

In 1995, opened its first franchise and grew
quickly through the late 1990s and early to mid –
2000s.

At its peak it had
around 1,400
franchise stores.

Had closed or been put up for sale by their
owners and suffered severe financial losses and
emotional distress.

Including the claims made by disgruntled Cold
Stone franchisees and the company’s
counterclaims.

The costs are too high relative to their revenues
and/or they’re trying to sell a premium-priced
product in a tough economy.

The business founders should be mindful of
when setting up a new business.
Challenges Facing Cold Stone
Creamery Franchisees

High prices in a tough economy.

Saturated market.

Believing the hype.

Franchisor control In regard to specific
financial issues

It’s extremely difficult to make money owning
and operating a Cold Stone Creamery franchise.

Some go so far as to say that the company’s
business model is “broken.”

100 Cold Stone Creamery stores closed in 2007
(up from 60 in 2006), and one Cold Stone Web
site recently had 303 stores up for sale.

“ Inventory of stores for sale now is higher than
it has been.”

The for –sale number as “at par with industry
expectations.”
Emotional and Financial Toll

Produce many articles and blog posts from who
talk about both the financial toll the emotional
toll that losing their Cold Stone franchise has
imposed on their lives.

The company argues that the ultimate success
of an individual
store depends
on how well it’s
operated.
Question 1

If you were thinking about buying a
franchise, like a Cold Stone Creamery
store, what financial information would
you look at and analyze before you
completed the purchase?
Cost –> rent + franchise fees + other expenses
Investment requirements
 Revenues – consumer survey
 Value in past years








Market share
Potential market growth
Costs and revenues of franchisees
Forecasted costs and revenues of the franchisee I would
open (based on the information of other franchisees with
similar features to the one that I would open)
Potential market threats
Consumers and suppliers bargaining power
Question 2

After reading the case , do you
sympathize with the disgruntled Cold
Stone franchisees, or do you believe the
company’s explanations?




High prices in tough economy: rent issue
Saturated market: shops too close, competitor
Believing the hype
Franchisor control: Pepsi bottles issue, 2-for-1
coupon $40,000

The ultimate success of an individual store
depends on how well it’s operated

For-sale number of franchise as “at par with
industry expectations.”
We do not believe the company ' s
explanations. Despite of the company ' s
obvious decline in market share and threat
of bankrupt, the company spokeswoman
characterized the for-sale number as “ at
par with industry expectations ”
 Why?
 If a company would confess their decline,
they would have to decrease a price for the
potential buyers (because the firm face a
bankrupt).

Question 3
Do you think that some businesses that
have financial trouble might never have
had a chance to begin with?
 If so, what can a business owner
(including a franchisor of a Cold Stone
Creamery) do ahead of time to make
sure the business is financially feasible?
Use the concepts conveyed in this
chapter and Chapter 3 to formulate the
answer.


There is a chance for firm with a financial trouble to get
investment. However no investor wants to invest to the
company that does not appear to have a potential
growth and / or has a poor management.

According the feasibility analysis theory if the company
is not financially feasible, the main idea of the business
should be recreated .

The business owner (or franchisee) should make a
feasibility analysis to make sure that the business idea
is (financially) feasible.

Buying intention survey should be administered in
order to predict revenue of the business and
subsequently analyze costs and assess a financial
feasibility
 It is especially important for franchisees who plan to open
a franchisee because every location of the business has
different factors influencing the feasibility
Question 4

At some point in your career, could you
see yourself buying a franchise? If so,
what type of franchise do you think
you’d enjoy owning?

In order to make a right decision
whether and what type of franchisee to
buy, there should be done a detailed
research about markets’ and
franchisers’ potential growth as well
as a feasibility analysis of a
franchisee in the proposed environment
and factors influencing business.